Carlsberg and Ford are two Western companies who were on they way down in China, but managed to renew themselves. Beida Business professor Jeffrey Towson uses on his website their examples to explain what companies can do to change their China operation for the better to draw some important lessons. (With a sidestep to Nanjing Fiat)
Lesson 1: You don’t necessarily need to get to China early to win.
Ford only really started producing cars in China in significant numbers in 2005 (61,000 sold in 2005). This was way behind General Motors, which established its joint venture with SAIC in 1997. And it was decades after Volkswagen launched its China joint venture in 1984.
Being early is an advantage for sure. But in some businesses, it is never too late go after the China market.
Lesson #2: You don’t need to start off in first tier cities.
Ford did not partner with a major automotive group in a coastal first tier city. It did not go to Beijing, Shanghai or Shenzhen / Guangzhou. It went to Chongqing, far inland.
While I have not seen Ford’s sales breakdown by region, it would not be surprising to see the company doing particularly well in the inland markets. Like Carlsberg, going deeper inland and perhaps avoiding the more entrenched competition in the coastal cities, was a good strategy.
The other factor here is that an inland headquarters has the advantage of lower labor costs. Manufacturers are increasingly moving inland to avoid rising labor costs on the coast.
Lesson 3: Market share can shift fairly quickly in China
General Motors’ auto sales increased to about 3.9 million in China in 2016. That is up from 3.6 million in 2015. Volkswagen is in the same sales range. There is definitely some market stability at the front of the pack.
However, market share in the middle shifts quickly. In the past years, Ford has surpassed Toyota and its two joint-venture partners which sold 917,500 cars (a 9% increase). Ford also passed Honda’s China volume at 756,000 cars (a 26% increase). So market share can move quickly in the middle.
More in Jeffrey Towson’s weblog. Here is part one.
Jeffrey Towson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.
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